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Malaysian Palm Oil CouncilFri, 05 Jun 2020 07:33:27 +0000en-UShourly1https://wordpress.org/?v=5.0.9An analysis of the United States oils and fats market demand.http://mpoc.org.my/an-analysis-of-the-united-states-oils-and-fats-market-demand/
Fri, 05 Jun 2020 07:33:23 +0000http://mpoc.org.my/?p=21425The flattening of the pandemic curve have
encouraged U.S. states to initiate plans to start the lifting of
restrictions put in place to combat the coronavirus outbreak, despite concerns
raised by many public health officials and politicians.

For many months, the COVID-19 pandemic is creating
massive chaos across the United States, disrupting daily lives, supply chains,
and wrecking the economy. The closing of restaurants and hotels to contain the
spread of coronavirus have cut demand for consumer goods.

U.S. businesses large and small were reeling from
shutdowns, cancellations, and public fear about the coronavirus as the number
of cases rose nationwide. The pandemic sent the economy into a recession and
some experts suggested the nation may be dealing with the virus until at least August.

This grim scenario has created a dent on the U.S.
demand and supply of oils and fats. The preventive measures put in place by the
Trump Administration and the various state governments which include travel
restrictions, social distancing and stay-at-home orders have affected the food
industry and the HORECA industry, among other sectors of the economy due to
lower demand.

However, according to recent news report, despite
the ongoing cases of COVID-19 in the United States, the U.S. soybean industry
continues to operate at near full capacity. U.S. railroads, barge operations,
trucking companies and other necessary infrastructure and logistical support
remain functioning at full capacity to support the ongoing efforts by soybean
processors, agricultural export facilities, grain inspectors and U.S. soybean
farmers. There is no danger of a food shortage, and the U.S. supply chain will
continue to take steps to keep food supplies safe, reliable, and uninterrupted.

USDA estimated the 2020/21 US soybean ending stock
to come in at 11.02 million MT, lower than its earlier estimate of 11.75
million MT which is a drop of 0.73 million MT. For the past three years, ending
stock were pegged at 15.79 million MT in the marketing year of 2019/20, 24.74
million MT (2018/19) and 11.92 million MT (2017/18).

Despite the restrictions during the pandemic, the
data published by Oil World indicates that the consumption of both soybean oil and
palm oil increased by 21.7% and 11.7% respectively in the month of March 2020
compared to the consumption volume recorded a month earlier. The end-stock
levels for both oils in March 2020 are higher than the volume recorded a year
earlier.

U.S. soybean oil export may have received a major boost with the
sale of 20,000 tonnes of soyoil by private exporters for delivery to China in
the 2019/20 marketing year as reported by the USDA. The sale was the first
soyoil deal with China since August 2018 and its biggest purchase of U.S.
supplies since November 2016, according to USDA data.

China’s commitment to purchase
more agricultural products from the U.S. might positively affect palm oil
imports into the U.S. With the signing of the ‘phase one’ trade deal in
January, China is expected to increase the uptake of U.S. soybean oil. This may
increase Malaysia’s palm oil exports to the U.S. since U.S. will be exporting
its local production.

The
fall of palm oil prices amid the current global coronavirus uncertainty may
also stimulate palm oil share in the vegetable oils market in the U.S.
Competitive prices of palm oil and strong demand from the food sector
post-COVID19 will stimulate resumption of demand for palm oil in the U.S. in
the second half of 2020. According to the recent Jacobsen analysis, when the
spread was close to parity, many end-users substituted soybean oil for palm
oil, which raised U.S. exports. With the spread moving in the opposite
direction, soybean oil export sales to slow as the relative value of soybean
oil moves higher. The spread between soybean oil and
palm oil will be the crucial indicator to watch to understand the strength of
U.S. soybean oil exports over the next six months.

United
States maintained its status as Malaysia’s top export destination to the
Americas region. Malaysia’s palm oil export to the US in Jan-April 2020
amounted to 204,015 MT, increasing by 29,776 MT or by 17% compared to the same
period in 2019. So
far, the preventive measures undertaken by the U.S. in slowing down the
spreading of the coronavirus have not affected Malaysia’s palm oil exports and
the consumption in the U.S. Opportunities
for palm oil is encouraging in U.S food industry sector. Demographic growth and
changing lifestyles offer a wide range of opportunities to palm oil in the food
processing industry.

The overall recovery of the oils and fats demand and consumption in
the U.S. will also depend on developments in the energy industry and how
quickly the U.S. economy recovers from the coronavirus pandemic. The U.S. Senate recently approved a $2 trillion
stimulus package designed to jump-start the economy reeling from the
coronavirus pandemic. The package will also provide a huge financial aid into
the ailing economy and support those affected by the closures and disruption of
daily activity by COVID-19.

*Disclaimer: This document has been prepared based on information from sources believed to be reliable but we do not make any representations as to its accuracy. This document is for information only and opinion expressed may be subject to change without notice and we will not accept any responsibility and shall not be held responsible for any loss or damage arising from or in respect of any use or misuse or reliance on the contents. We reserve our right to delete or edit any information on this site at any time at our absolute discretion without giving any prior notice.

]]>The Impact of COVID-19 on Palm Oil Demand in the EUhttp://mpoc.org.my/the-impact-of-covid-19-on-palm-oil-demand-in-the-eu/
Thu, 04 Jun 2020 02:10:43 +0000http://mpoc.org.my/?p=21414Europe is one of the continents
worst affected by COVID-19, with over 1.3 million infections and more than 160,000
fatalities. Worldwide, 345,000 deaths had been reported as of 25 May 2020.

All 27 member states
of the European Union (EU) are affected by the corona crisis to varying
degrees. According to the Johns Hopkins University, the countries with the
highest number of infections registered as of 25 May were Spain (235,772),
Italy (229,858), and France (182,709).

All three have imposed
the strictest lockdown measures of all EU member states. Some restrictions have
been extended to the end of June and are only being eased very tentatively.

Also, Germany has a
comparatively high number of infections (180,328). But while there are fewer fatalities
(8,238) and seriously ill patients than in other EU countries, the number of
people who have recovered – over 160 thousand – is higher.

Finally, the United
Kingdom, which left the EU on 31 January 2020, is also severely impacted with
approximately 260 thousand infections and more than 36 thousand fatalities

Economic Impact of the Crisis

Apart from its serious
health impact, COVID-19 also has grave implications for the economy.

According to the
International Monetary Fund (IMF) and the Organization for Economic Co-operation
and Development (OECD), the global economy is plunging into a recession worse
than that of the financial crisis of 2008-9. All EU member states are affected.

The government of the
EU´s largest economy, Germany, anticipates a fall in gross domestic product
(GDP) of 6.3 percent for 2020. France, the second-largest economy, of six to eight
percent and Spain at least four percent. Some forecasts see the economy of the
United Kingdom contracting in the first quarter by as much as 15 percent.

Based on our
experience from the crisis year of 2009, one percent fall in GDP means an
additional one million unemployed.

The tourism, hospitality,
retail, and commerce sectors have been badly hit everywhere. In Italy, for
example, 81 million guest-nights have been lost due to the lockdown controls
imposed since the beginning of March.

Measures at EU Level

The
EU institutions face the challenge of combating the pandemic without destroying
the economy. By acting in concert, the member states intend to make full use of
the options provided by the general rules for state assistance and the EU
stability and growth pact.

To
this end, the European Commission and the member states have agreed on
adjustments to various structural and investment funds to make a total of EUR
37 billion available at short notice. A second financial package is to follow.

The
EU solidarity fund, originally intended to support member states in the event
of natural disasters, can now be used for public health crises as well. This
means that in 2020 up to EUR 800 million will be available in the fight against
COVID-19.

The
rules of the stability and growth pact, which impose conditions on the member
states for running a balanced budget, have been suspended to give member states
greater financial freedom to tackle the crisis.

Moreover,
the European Innovation Council is making funds of EUR 164 million available to
SMEs whose work involves dealing with COVID-19.

EU
member states are allowed to provide direct guarantees, tax advantages, and
payments of up to a maximum of EUR 800,000 per company.

Further
European institutions like the European Central Bank (ECB) and the European
Investment Bank (EIB) have also created their programmes and support packages.

In
addition to these measures at EU level, most national governments have
announced aid packages worth billions of euros to support the economic sectors
worst hit by the corona crisis like gastronomy and tourism.

The
packages include emergency credit (like the UK programme worth 300 billion) as
well as grants.

Impact on the Consumption of Palm Oil

Before
the corona crisis, global demand for palm oil was estimated to be about 74.6
million tons and expected to rise further from 2020 to 2027.

Palm
oil is the most important plant oil imported by Europe. Just four EU member
states, the Netherlands, Italy, Spain, and Germany, account for almost two-thirds
of total EU palm oil imports.

However,
the global pandemic is having severe repercussions for the supply, demand, and
prices of oil and fats in general, including palm oil. Estimates say that the consumption
of oils and fats in the EU member countries and the UK will decline by 1 -1.5 million
tons in 2020.

For
the same period, a worldwide decline in imports of palm oil by 2.7 – 3.0 Million MT in comparison to the previous
season is forecast. In the EU, imports will probably drop by as much as 1.0 Million
MT, mostly due to the energy sector and the sharp decline in biodiesel consumption.

According
to Bloomberg, in 2018 the consumption pattern of palm oil in the EU was as
follows:

50% for biodiesel

40% for food, animal feed, and cosmetics

10% for heating and electricity.

Since
2010, the total European consumption of palm oil has risen by approximately 8% annually,
mainly due to biofuel. However, the demand for edible palm oil has fallen in
recent years.

The
precise impact of the Coronavirus pandemic on the market for palm oil is
unknown as of now. Given the current economic standstill and the high levels of
unemployment that will probably affect much of Europe, it can be assumed that the
overall consumption of palm oil will only start to rise slowly again in the
medium term.

Much
will also depend on the recovery of restaurants and hotels and the tourism and
event sectors in general. The widespread lockdown has led to the closure of
countless canteens and restaurants and has choked off demand for edible oil
within the European Union as well as in the major importers, India and China.

On
the other hand, some analysts assume that palm oil usage in the production of food
and personal care products may not undergo significant changes in Europe as
demand might remain strong.

Even
before the Corona-crisis, palm oil was under enormous pressure on the European
market because of the supposed ecological impacts in producing countries. It is
expected that the pandemic will lead to even higher environmental sensitivity.

As
a result, consumers – at least in Western and Northern Europe – will be more
interested in certified sustainable palm oil. The EU intends to adhere to its
goal of only importing and processing palm oil that is 100% sustainable by the
end of 2020.

Another
critical factor amplified by the COVID-19 crisis is the widespread call for
consumers to make greater use of local and regional products, including
vegetable oils. This trend is supported on the political level by the EU as
well as by many national governments.

The
recent decline of almost 10 percent in the price of maize, palm oil, rapeseed,
and soya beans is closely linked to the falling demand for ethanol or biodiesel
and the related drop in oil prices.

It
is not possible to make reliable predictions about how the price of plant oils
will develop. The marked fall in demand for palm oil in recent weeks, both
worldwide and in Europe, is likely to last at least until the middle of 2020,
depending on the trajectory of the pandemic.

Summary

It is
likely – despite the absence of conclusive data – that 2020 will be
characterised by very sluggish demand for palm oil in the EU. Nevertheless, it
will be possible to stimulate some market segments more quickly than others. It
remains uncertain how prices will develop.

Producing
countries, including Malaysia, should adopt appropriate marketing and
communication measures to reinforce the standing of palm oil as the most
productive, cost-efficient, versatile, and healthy oil of its kind.

These
times are difficult for producers, importers, and consumers alike. Therefore, it
seems paramount to ensure close contact and the free flow of information
between all the parties involved. That is a chance for producers to position
themselves as flexible and trustworthy partners.

It also is
an opportunity to position Malaysian palm oil more strongly as a brand and to
communicate its advantages (certification (MSPO), a high level of transparency,
no deforestation) even more clearly.

In the
current situation, given the loss of millions of jobs worldwide, the social
aspect of Malaysian palm oil (i.e., the devastating effect on small farmers)
should be accentuated.

*Disclaimer: This document has been prepared based on information from sources believed to be reliable but we do not make any representations as to its accuracy. This document is for information only and opinion expressed may be subject to change without notice and we will not accept any responsibility and shall not be held responsible for any loss or damage arising from or in respect of any use or misuse or reliance on the contents. We reserve our right to delete or edit any information on this site at any time at our absolute discretion without giving any prior notice.

]]>Palm Oil Demand Scenario in China post COVID-19http://mpoc.org.my/palm-oil-demand-scenario-in-china-post-covid-19/
Wed, 03 Jun 2020 04:11:41 +0000http://mpoc.org.my/?p=21396China’s economy started picking its pace but not the
demand for palm oil. The total import of palm oil (PO), rapeseed oil (RSO) and
soybean oil (SBO) in Jan-Mar 2020 were 2.49 million MT, decreased by 7.34% as
compared to the same period last year, where drop-in PO was the main factor
contributing to this. PO import volume was at 1.82 million MT, which decreased
by 367,701 MT or 16.8% as compared to last year. In contrast, import of SBO
increased by 24.1% or 33,810 MT y-o-y, and the import of RSO was 493,357 MT, up
136,510 MT or 38.25% as compared to the same period of last year. The
ongoing poor demand for palm oil is mainly attributed by COVID-19 pandemic and
an unattractive price discount against other major edible oils.

Reducing Edible oil
Demand & Increase in Soybean Import

As per April 2020’s estimation, the annual output of
edible vegetable oil in China will be at 26.40 million MT in 2019/20 and the
import volume is 7.88 million MT. The consumption volume is estimated to be
32.43 million MT, decreased by 960,000 MT compared to last month’s forecast.
The reduction in the figure mainly due to the significant reduction in oil
consumption in the HORECA sector due to the COVID-19 epidemic spread.

Nevertheless, a report of Agricultural Outlook in
2020-2029 released by the Ministry of Agriculture and Rural Affairs stated that
China’s soybean imports in 2020 are expected to reach 92.48 million MT.
Consequently, the soybean output in 2020 is expected to be at 18.81 million MT,
an increase of 3.9% year-on-year, and the crushing volume is expected to be at
85.98 million MT. China’s soybean consumption is expected to grow steadily in
the next decade and will continue to rely mainly on imports, especially with
the increasing hog production.

The stocks building since the end of last year, and
expectation of poor demand due to the Covid-19 have slowed down the interest in
sourcing palm oil in Q1 2020. These factors ultimately resulted in China having
only half the palm oil stock level it was holding, to record low level of half
a million MT since Dec 2018. By 22 May 2020, China’s palm oil stock was at
523,500 MT, decreased by 83,500 MT from last month. Annual demand for palm oil
in China as per 2019 record is 7.55Million MT or 630,000 MT/month. Such a
drastic drop in stock has inevitably improved the import margin (between the
landed cost and the local market price for palm oil) which turned positive
since May.

However,
with the rise in the soybean import and its crushing activity for soymeal, the
soybean oil availability in the market will increase. Oversupply of soybean oil
is expected to reduce the edible oil’s price. The price discount disparity
against the palm oil will be lessened. So, chances are slim to expect a very
rapid demand growth towards palm oil.

On a bright side, the rising climate temperature from
the south to the north of China gradually enables palm oil to be used without
fractionation. If the fractionation cost discarded, the price palm oil against
soybean oil (or any other soft oil) will be attractive for buyers. Hence, it is
expected that the import of palm oil will continue to pick up in Q3 2020 with
an anticipated average monthly import of 600,000 MT.

*Disclaimer: This document has been prepared based on information from sources believed to be reliable but we do not make any representations as to its accuracy. This document is for information only and opinion expressed may be subject to change without notice and we will not accept any responsibility and shall not be held responsible for any loss or damage arising from or in respect of any use or misuse or reliance on the contents. We reserve our right to delete or edit any information on this site at any time at our absolute discretion without giving any prior notice.

During the last few years, global trade has been heading towards an unhealthy direction where protectionism and ‘prosper only myself’ national agendas are the order of the day. This is a dangerous trend that runs counter to the United Nation’s Fair Trade Charter and against Malaysia’s ‘prosper thy neighbour’ trade philosophy.

Year 2018 was a very challenging time for global oils and fats markets, and the Malaysian palm oil was not spared as well. Palm oil export volume and earnings recorded a decline compared to year 2017. Total export revenue took a 12.49% tumble to RM65.4 billion from RM 74.7 billion recorded in 2017. This was due to the significant decrease in the prices of crude palm oil (CPO) and palm oil products, worldwide.

CPO production was affected after the significantly high yield growth in 2017. The production was 2% lower at 19.52 million tonnes, compared to 19.92 million tonnes in 2017.

NEW DELHI (June 2): India’s edible oil imports are likely to recover in June after a sharp drop during a nationwide lockdown to contain Covid-19 in April and May, according to industry experts.

India is expected to buy 1.14 million tonnes of vegetable oils this month compared with the average of 865,000 tonnes in the previous two months, Sudhakar Desai, president of the Indian Vegetable Oil Producers’ Association (IVPA), said during a webinar on the pandemic’s impact on the industry.

In his view, the prevailing price spreads seem attractive for crude palm oil (CPO) and with the government’s recent cancellation of dozens of import permits for refined products would lead to more CPO purchases by Indian refiners.

The lockdown to contain the spread of the coronavirus has severely hit India’s food service industry, resulting in a significant reduction in the commercial consumption of palm oil.

With the government now easing rules for reopening businesses, a recovery in demand is expected over the coming months.

It would take a year for normalcy to return to the market, said Shiv Kumar, a senior executive at consumer products giant ITC Ltd.

A lot of food service demand is being converted into in-house consumption and ITC would focus on packed and ready-to-eat foods, Kumar told the webinar.

He said this change in food habits will dictate the choice of vegetable oils.

]]>India’s vegoil imports could jump from June, trade body sayshttp://mpoc.org.my/indias-vegoil-imports-could-jump-from-june-trade-body-says/
Wed, 03 Jun 2020 02:55:54 +0000http://mpoc.org.my/?p=21378MUMBAI (Reuters) – India’s vegetable oil imports are likely to surge from June onwards as New Delhi eases coronavirus curbs, the head of a trading body said on Monday.

The south Asian country is the world’s biggest importer of edible oils and higher purchases could support Malaysian palm oil prices.

India could import 1.14 million tonnes of vegetable oils in June, up from an average of 865,000 tonnes during April-May, said Sudhakar Desai, president of the Indian Vegetable Oils Producers’ Association (IVPA).

“Vegetable oil import needs could be 1.3 to 1.4 million tonnes per month during the July to September period,” Desai said after a webinar with industry officials.

India extended its lockdown until June 30 in high-risk zones but permitted restaurants, malls and religious buildings to reopen elsewhere from June 8 despite a record high number of cases detected nationwide on Saturday.

India buys palm oil from Indonesia and Malaysia and other oils, such as soyoil and sunflower oil, from Argentina, Brazil, Ukraine and Russia.

The country’s edible oil consumption could drop by nearly 7% to 21.7 million tonnes in the 2019/20 marketing year ending Oct. 31 as demand was squeezed during the lockdown, Desai said.

]]>Palm oil prices scale near two-month high as May exports risehttp://mpoc.org.my/palm-oil-prices-scale-near-two-month-high-as-may-exports-rise/
Tue, 02 Jun 2020 01:13:28 +0000http://mpoc.org.my/?p=21329KUALA LUMPUR: Malaysian palm oil futures rose to their highest level in nearly two months on Monday, supported by a rise in May exports and optimism over a recovery in demand.

The benchmark palm oil contract for August delivery on the Bursa Malaysia Derivatives Exchange rose 39 ringgit, or 1.7 per cent, to 2,331 ringgit ($540.33) a tonne by the midday break, its highest since April 9.

Palm oil jumped 10 per cent last month, its biggest monthly rise this year, as prices were boosted by hopes of lower output in May and resumption of purchases by India, the world’s largest edible oil consumer.

“The market was drawing strength from May export numbers and better export outlook in June given the start of 0 per cent export tax,” said Sathia Varqa, owner of Singapore-based Palm Oil Analytics.

Malaysia’s exports rose between 7 per cent and 8.4 per cent in May from the month before, cargo surveyors said on Monday.

The world’s biggest palm oil producers Indonesia and Malaysia have set export tax for crude palm oil at zero for June.

However, Indonesia will charge a blanket export levy of $55 per tonne on shipments from June 1 to raise funds for a domestic biodiesel programme.

“The crude palm oil market sentiment continued to be positive from the short week last week tracking rises in the equity market as countries begin to gradually open up from their coronavirus lockdowns,” Varqa said.

Dalian’s most-active soyoil contract rose 0.86 per cent, while its palm oil contract inched up 0.82 per cent. Soyoil prices on the Chicago Board of Trade were up 1.06 per cent.

Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.

Palm oil may rise into a range of 2,345-2,409 ringgit per tonne, as suggested by its wave pattern and a retracement analysis, Reuters technical analyst Wang Tao said.

However, as production reaches its peak from August until October, the commodity price may fall slightly to RM2,200 per tonne.

“The good numbers of export from Malaysia to India have been positive in the month of May which we see supporting crude palm oil futures in the last two weeks,” he said at a global webinar entitled ‘Is Covid-19 a Bull or a Bear for Veg Oils?’ hosted by the Indian Vegetable Oil Producers’ Association.

India, which is Malaysia’s top buyer of palm oil, has resumed its purchase of palm oil after four months amid improving trade ties between the two nations, Sathia noted.

For the month of March for example, Malaysia only exported 10,806 tonnes of palm oil to India, a whopping 97 percent slump from a year earlier and the lowest monthly total in board data going back to 2000.

Sathia added that for the first four months of 2020 Malaysian palm oil exports was down by 25 percent versus the January-April 2019 period.

On production, he said Malaysia and its counterpart, Indonesia, would see lower production while facing the uncertain and fragile COVID-19 challenges.

Malaysia’s production is expected to go down to 19 million tonnes in 2020 from 19.85 million in 2019 while Indonesia’s production is likely to remain unchanged at 45 million tonnes.

While Malaysia reduces the CPO export tax to zero percent in June from 4.5 percent in May and Indonesia increases the levy by US$5 to US$55, the Malaysian CPO exports will enjoy a price discount.

This leaves Malaysia’s CPO cheaper than Indonesia by US$10 to US$15, he stressed.

“This is good for Malaysia in the short term. However, if Indonesia decides to scrap the levy or reduce the levy, then the dynamics will change and vice versa.

“Meanwhile, as China and US trade remains uncertain, China may not be pursuing its purchase of soybean oil from the US and turn to Brazil. But as COVID-19 impacted many in the agriculture sector, China has a window to shift its edible oil purchase to Malaysia and Indonesia…and given its cheaper price, Malaysia may benefit more,” he opined.

Dr James Fry of LMC International Ltd, who was another panel speaker during the three-hour discussion with almost 12,000 online participants, said the biodiesel demand has inevitably suffered along with other end-uses for oils, since the consumption of fuel has been hit by the impact of COVID-19.

“However, biofuel demand is determined by government policies. Mandates are often announced but are not always implemented. In Malaysia, we have seen the B20 (a 20 percent biodiesel blend) mandate postponed several times, presumably because the government does not want to pay a larger subsidy or ask drivers to pay more for fuel.

“Indonesia, with its much bigger and more ambitious B30 mandate, has faced up the problem of funding the mandate by making the producers pay sizeable export levies to a fund to keep biodiesel competitive,” he said.

]]>Kenya expected to increase palm oil imports in the coming monthshttp://mpoc.org.my/kenya-expected-to-increase-palm-oil-imports-in-the-coming-months/
Mon, 01 Jun 2020 03:31:20 +0000http://mpoc.org.my/?p=21309On 8 April 2020, Kenyan President Uhuru Kenyatta has announced a 21-day restricted movement orders in Nairobi, Mombasa, Kilifi, and Kwale in its effort to combat COVID 19 spread and has since extended the order until further notice. Fortunately, the movement of food supplies and other essential cargos will continue as normal during the restricted movement period. The economic impact of the restricted movement order is felt across the country especially the lower-income population in Nairobi and Mombasa who relies heavily on informal jobs are severely affected with little to no income. In addition, there is an ongoing desert locust invasion in Kenya that affected food producing crops in the country such as rice, maize, irish potatoes, and wheat. In view of this, the Kenyan Government has initiated a food aid programme to distribute food to the lower-income population in the affected regions. Kenya, a major consumer of palm oil in Sub-Saharan Africa with a consumption of 787,600 MT of oils and fats. The country relies heavily on oils and fats imports due to its estimated local production of sunflower and cotton oil totalling only 3,400 MT in 2019. Palm oil held an estimated market share of 92.7% of the total oils and fats consumption in Kenya. In the same period, Kenya imported a total of 808,700 MT and exported a total of 110,100 MT of palm oil. Malaysia held an import share of 24% or 193,340 MT in 2019.

Kenya is a major CPO importer, attributed to its
preferential tariff at 10% compared to PPO at 25%. Another reason for the major
market share in CPO in Kenya is because Kenya imposes food fortification logo
and certification policy towards vegetable oils and fats containing Vitamin A
and this has led to difficulty in port clearing. The policy has caused RBD
Olein import share in Kenya to drop significantly and local industry members
have shifted to the importation of CPO instead for local processing to comply
with the local policies. In 2019, Kenya
imported a total of 150,673 MT of Malaysian CPO, an increase of 20% compared to
the previous year at 120,738 MT. Malaysian import share of CPO and PPO into
Kenya is at 79.2% and 20.8% respectively. In the upcoming months, Kenya is
expected to increase its CPO imports as the current stocks are being consumed
rapidly.

Figure 2: Monthly MPO Imports into Kenya 2017-2019 (MT)Source: MPOB

From the graph above, the first half of the year shows a
slow trend in imports due to the steady supply of palm oil stocks. However, in
the second half of the year, major restocking activity occurs and lasts from
July to December, especially in the month of September as a result of the sunflower
planting season in Tanzania during the same period, in which the country relies
on palm oil imports from Kenya to satisfy its immediate demand. December 2019
imports dropped drastically due to overstocking in the previous month.

(MT)

Jan

Feb

Mar

April

Jan-Apr

2020

6,776

12,765

8,099

29,269

56,910

2019

14,878

566

6,110

18,387

39,941

Table 1: Q1 MPO Imports into KenyaSource: MPOB

January-April 2020 MPO imports into Kenya recorded an
increase of 30% compared to the same period of the previous year. This increase
is attributed to the major stocking activities in anticipation of supply
disruption from COVID 19. It is important to note that major restocking
activities occur in the 2nd half of the year as shown in Figure 2 due to
increased demand from neighbouring countries.

In view of this, Kenya will experience a surge in food
demand that may force local industry members to increase their imports in the
upcoming months as palm oil stocks dwindle. The reason for the increase in
consumption is the Kenyan Government has initiated a food aid programme to
supply food and relief for the lower-income population that are affected by COVID-19
and desert locust invasion. The programme may see an increase in demand of
household items such cooking oil, ready-to-eat meals, bakery, and confectionery
products as part of the Government’s effort. Despite this, HORECA industry
members may stay on the side-line to monitor the COVID-19 situation before
ascertaining the full impact of the pandemic on their industry as lockdowns in
major cities negatively affects their operations.

Weakening Kenyan Shillings may pose a challenge towards the
country’s buying behaviour. Nevertheless, the Kenyan Government’s food aid
programme and ongoing desert locust invasion is expected to help increase the demand
for palm oil into the region as food demand has outweighed the supply. A small
drop in bulk buying in the HORECA sector is expected as the industry may stay
on the side-line to monitor the current situation. Thus, with the increase in
consumption coupled with dwindling palm oil stocks, Kenya is expected to
increase its imports in the upcoming months.

*Disclaimer: This document has been prepared based on information from sources believed to be reliable but we do not make any representations as to its accuracy. This document is for information only and opinion expressed may be subject to change without notice and we will not accept any responsibility and shall not be held responsible for any loss or damage arising from or in respect of any use or misuse or reliance on the contents. We reserve our right to delete or edit any information on this site at any time at our absolute discretion without giving any prior notice.